RPT-Fitch: Kashagan Oil launch positive for Kazakhstan, KazMunayGas
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Sept 13 (Reuters) - (The following statement was released by the rating agency)
The production of the first oil from the Kashagan field this week is positive for Kazakhstan and KazMunayGas, Fitch Ratings says.
The onset of production is one reason we expect Kazakhstan's economic growth rate to recover after a slight slowdown in 2012. Meanwhile, KazMunayGas expects the Kashagan field to make a material contribution to its EBITDA and cash flow from next year.
We had anticipated production at Kashagan starting this month. The full impact will depend on how quickly production ramps up after this week's initial output. Kazakh officials have stated that it would take between three weeks and one month to launch commercial output from the field. Eni, lead member of North Caspian Operating Company, which is developing Kashagan, said Wednesday that in the initial 2013-2014 phase, output will grow to 180,000 barrels per day, compared with current output from Kazakh oil fields of 1.6 million barrels per day.
The impact of Kashagan is already incorporated in our Kazakhstan real GDP growth forecasts of 5.3% for 2013 and 6.0% for 2014, up from 5.0% last year. Higher commodity exports support our expectation that Kazakhstan's economy will grow more quickly than the 'BBB' category median over the medium term.
Increased oil exports from Kashagan will also support Kazakhstan's current account surplus, which had been stagnating thanks to lower oil prices. However, foreign direct investment may decline as the first round of capital investment into the field slows.
Kashagan has estimated reserves of 35 billion barrels of oil, of which 11 billion barrels are considered as recoverable. Plans to increase production to 370,000 barrels of oil equivalent per day will depend on current or future developers' appetite for the significant additional costs involved in the second phase of the project. Phase 1 suffered several delays and cost around USD46bn. Kazakh officials estimate that if Phase 2 is completed total domestic production may increase to about 2.2mmboe/d in 2018.
We also view the launch as positive for KazMunayGas, which has a 16.8% stake in the project. KazMunayGas expects to use Kashagan's contribution to EBITDA and cash flows to repay about USD2.6bn in project-related debt. Kashagan, along with its Karachaganak project, are important for KazMunayGas as production from its majority-owned exploration and production subsidiary is on a steady decline.
What's more, China National Petroleum Company became a shareholder in Kashagan with an 8.3% stake on 7 September 2013. This should help Kazakhstan over time increase its oil supplies to China, which are currently constrained by pipeline capacity.
The existing capacity of the Kazakhstan-China pipeline is 14 million tons per annum, and exports to China reached 10mtpa in 2012, or 12% of output. KazTransOil, Kazakhstan's national oil pipeline operator said earlier this year that Kazakhstan will boost oil exports to China by 20% to 12mtpa (or 240 mboe/d) in 2013 and it hopes to further increase capacity to 20mtpa, or by over 40%. We rate Kazakhstan 'BBB+' and KazMunayGas 'BBB'. The Outlook on both ratings is Stable.
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